Small business loan approvals at big banks are down by 50% compared to last year’s figures according to data from Biz2Credit Small Business Lending Index. Loan approvals from big banks with more than $10 billion in assets were 13.2% in November this year compared to 28.1% from the same period.
Loan approvals from big banks declined for the second month in a row with an approval rate of 13.3% in October to 13.2% in November indicating challenges for small business owners to source financing.
Likewise, loan applications from small banks decline slightly to 18.3% in November this year from 18.4% the previous month. Small banks accounted for the largest loan approvals with more than 50.5% of funding to small businesses in November.
Biz2Credit Lending Index – December 2020
Other findings of the Index include:
- Credit unions slipped two-tenths of a percent to a 20.7% approval rate in November from 20.9% in October.
- In November 2019, credit unions approved almost 40% of the applications they received.
- Institutional lenders, as well as alternative lenders loan approvals, did however rise slightly. Institutional lenders approved 22.6% of applications for funding in November, up slightly from 22.5% in October. While those from alternative lenders rose slightly from 23.3% in October to 23.4% in November.
- Last year in November, institutional lenders approved nearly two-thirds (66.1%) of their funding requests. And alternative lenders granted 56.3% of their applications.
Growing Fears of Application Rejections
The decline in loan approval comes at the heels of nonfarm payroll employment rising by 245,000 in November. The unemployment rate edged downward to 6.7%, down by 3.2% from the 8 % high as COVID-19 hit. Job gains in transportation and warehousing are up as holiday gifts are on their way to stores and to consumers. Employment also improved in professional and business services and healthcare.
“Even though many companies are operating at a loss right now and need capital, they are discouraged from applying for funding because of the likelihood or rejection as approval rates drop and because there is so much economic uncertainty caused by the coronavirus,” said Rohit Arora, Biz2Credit CEO.
More in: Biz2Credit